Beijing AIC Fines Nike for Having Double Standard: Update

October 30, 2012

You remember this story from last week, right? Nike was fined by the Administration for Industry and Commerce (AIC) for . . . well, for something. It wasn’t entirely clear to me, although a lot of folks were complaining about Nike having a “double standard.”

Nike did falsely advertise that a shoe here had two air cushions in the sole, when there was really only one. I’m sure that makes a huge difference (yes, I’m being sarcastic). So we’ve got false advertising, potentially fraud. Advertising Law, Consumer Law violations, blah blah blah.

But what bothered me was the rhetoric from the AIC, which specifically included this “double standard” language. Apparently the two-air-cushion version of the shoe is being sold overseas, and at a lower price than the crappy, single bladder China version. The official said that China would not accept double standards.

I’ve kept my eye on some of the press reports on this ever since. It seems to me that multinational corporations have a whole lot of double standards when it comes to pricing and product features, but unless the products in question fall under specific regulations (e.g., price controls), I fail to see why this should trigger any sort of fine.

So here are a few choice quotes from the usual English-language local sources. If this makes any sense to you, please let me know:

International companies should increase their respect for the Chinese market as authorities begin to punish those who do business with a double standard in China, analysts told the Global Times[.]

Question: why?

According to China’s Consumer Protection Law, Nike should pay one to five times the selling price in fines, and the consumers could be compensated with twice the selling price, according to Qiu Baochang, president of the legal panel at China Consumers’ Association.

This has nothing to do with a “double standard,” but rather the false claim made about the shoe’s features.

Legal experts are calling for tougher punishments for companies that sell substandard and overpriced products in China.

When was it decided that one air cushion was substandard? And who determined that the price was unacceptably high?

“This is not only discriminatory to Chinese consumers, but also a violation of Chinese laws and regulations,” said Yi Shenghua, a lawyer at Yingke Law Firm in Beijing.

“We should reflect on the regulatory system and government standards in the country while stepping up punishment for this kind of behavior,” he said.

It might be a violation of law, but not one that involves discrimination. I think this guy is talking about two different things.

Xue Guifang, director of the board of consumer rights protection at the China Law Society, agreed, saying: “Industries, especially world-renowned businesses, should not only provide world-class products, but also first-class respect to consumers.”

This guy is a “legal expert”? That quote is suspiciously bereft of any reference to an actual law. “World-class” and “first-class”? Please.

You know, I was beginning to be really disheartened by all this horrible news coverage and blather, but the Beijing News finally came through with a reasonable description of what actually happened:

Nike has been fined 4.87 million yuan ($779,700) for deceptive advertising in China, according to the Beijing Administration for Industry and Commerce recently.

One of Nike’s high-end basketball shoes, which was advertised as double air cushioned, was sold at 1,299 yuan in China, more than 500 yuan higher than the price of the same model abroad. Moreover, the footwear sold in China only contained one air cushion.

Chinese consumers have long been annoyed by foreign brands’ “double standards.” However, the reason for Nike’s fine this time is not double standards, but deceptive advertising. (from a Global Times translation) [my emphasis]

Finally, someone willing to be honest about what this incident was and what is wasn’t. However, before I had a chance to get too excited, I read on and ran into this:

If we want to end foreign companies’ “double standards,” we have to make efforts in legal procedures.

I’m not sure what legal procedures or new laws would be appropriate, but at least this is an acknowledgment that Nike did not violate current law because of a “double standard.”

I would question, though, what sort of legal regime people want. Chinese consumers should be guaranteed the lowest global price for any consumer product? If a product feature is offered to a consumer anywhere in the world, should the law mandate that the company offer that feature in China as well?

That sounds crazy, but maybe I’m missing something here.

8 thoughts on “Beijing AIC Fines Nike for Having Double Standard: Update

  1. bystander

    I don’t think that “double standard” is a legal term of art. It just means this rather commonsensical thing: companies think they can get away with things in China that they wouldn’t get away with in the US (for example). Wouldn’t surprise me if it’s true. If you’re selling into a market that’s flooded with fake junk, and competing with the fake junk on price, there is probably a big temptation to fake your own products to lower your costs. And the consumer protection guys are right to call it out and punish it I think. No? I don’t know what the applicable laws are, but as a matter of business integrity and common sense, it makes sense (to me at least. but then I don’t find most of ‘law’ very commonsensical haha).

  2. Federico

    In my opinion is much more easy, useful and populist if you support the “double standard” fine explanation: it looks like you fight against the bad american company that is trying to cheat chinese consumer.

    Otherwise the idea of “deceptive advertising” is too difficult to understand for a lot of people..

  3. Nicole

    This is simply supply and demand in a two-tier system. If Chinese customers refuse to pay the mark-ups (as high as 100% for some companies), the prices will drop – the consumers are allowing for the “double standard”. Add in the luxury tax on some items, and the data is even more skewed. Any law that passes that sets prices will make foreign companies think twice about what they chose to import into the market – they’ll make special Chinese only products that make it too difficult to do price comparisons, and which will ultimately be an inferior product to keep their margins.

  4. Fel

    NIKE can offer the same quality and price as in the states while china ensuring to punish counterfeit and fake products/producers and controls IP and basic world wide accepted standards…. otherwise if u want US prices buy the fake nike at taobao or any shop in town catering world wide renowned brands with first class customer service to a break neck price… any one wanna buy buma or mike shoes?

  5. jdmartinsen

    A 第一财经日报 article today also frames the fine as motivated by some sort of double-standard violation, and cites other examples like Starbucks coffee is 75%, Jeep, and various cosmetics lines which sell for far more in China than in Europe or the US. Despite a sensationalized lead, the rest of the article is more sober, and places a lot of the blame on import tariffs. It also notes that the gap is shrinking in a lot of cases as domestic brands become more viable competitors.